What if rent assistance became mortgage assistance?

Think about this. Almost three quarters of a million Age Pension recipients (743,105) do not own their own home.  Of these, about 563,135 pay some form of rent, with about half in the private rental market (285,340) and the rest in government, community or other housing types.   

Commonwealth Rent Assistance (CRA) is available to people on an Aged Pension if they meet the eligibility criteria. About 334,910 households receive the Age Pension and CRA. 

Many of these people were (or still are) hard-working Australians who simply couldn’t get a foothold in the housing market or were once a homeowner but have fallen out of the market.  

Many face a lifetime of renting, living in insecure housing with rising rents.  

They will use the CRA to help them meet their rent costs, but this only covers about 30% of rental costs, at best. 

Some of these people, might be able to buy a home, if assistance was available and housing was affordable. 

According to the Grattan Institute, 40% of renters:  

• aged 45-54 had more than $171,000 of savings 

• aged 55-64 had more than $119,000 of savings 

They have some savings but have Buckley’s chance of getting a loan to buy even a modest home, even with assistance from the Help to Buy scheme. 

While they rent, they get on average about $4,500 per year from the Federal Government to simply hand over to their landlord.  

This raises an important question: Is it possible to redirect “dead” rent money from CRA to help older people who have some savings to secure a modest mortgage to buy an affordable home of their own? 

Is it an idea that is too good to be true? Or is it lateral thinking to repurpose a payment that is already being given out to help people put an insecure roof over the head to help them secure a home of their own.

How it might work 

Rather than waste government funds on rent, the government could adapt CRA to create CMA or Commonwealth Mortgage Assistance. 

The scheme would be a last resort measure for people who have reached pension age and have not been able to buy a home or have lost their home through personal circumstances beyond their control, such as divorce or the loss of a partner. 

Eligibility would be for Age Pension recipients who have an adequate level of savings to contribute towards the purchase of a home but not enough that they could do it themselves. This could be money from a divorce settlement, superannuation, or other personal savings.  

The government would guarantee that CMA be available to the applicant as an ongoing source of income that could be used by a bank when processing the loan approval (changes to banking rules would be required to accommodate this).  

CMA could be paid directly from Centrelink to a bank to offset home loan repayments to ensure it is used for this purpose. 

If a person’s income increased through a change of circumstance e.g. changed employment or recoupling or if the person rented out a room in their home, CMA would be adjusted or stop, but the facility to restart the payment quickly would remain if life circumstances changed to make it easier to ensure payment continuity. 

There would be restrictions on the value of the home that could be bought and the amount a person could loan but this would likely reflect commercial lending realities. 

With the absence of lower cost housing in most communities, government would need to couple this with a scheme to build affordable seniors housing for older people to purchase. As discussed in an earlier Connect article, this is a section of the market that is sadly missing. An added benefit of these types of seniors projects is the efficient delivery of home care and other support services to seniors. 

A significant benefit of CMA is that it adds nothing to the Federal Budget – its money that is already been spent, in our view quite illogically. 

If you support new ideas like this to get older people into their own homes, then sign up to our Better Housing campaign to show your support.